14 minute read
Want to Own Your Own Brokerage?
By Annette Hubick
Inquiring minds want to know—a lot of them. According to IBAA COO Janis Losie, “This is one of the top two most-often-asked questions that the association receives.” Losie suggests a good starting point is to reach out to the Business Development Bank of Canada, which provides financing and advisory services to small and medium-sized enterprises, as well as an extensive articles and tools section on its website (www.bdc.ca). For more industry-specific and detailed insight into the considerations of purchasing a brokerage, Losie recommends a publication produced by Insurance Brokers Association of Ontario, "A Guide to Purchasing or Selling a Brokerage."
First Things First
Developing solid technical insurance knowledge as well as skills in areas such as human resources, marketing, sales and more will be critical, “and that’s where IBAA can help,” says Losie. “We have an extensive professional development offering and are happy to work with brokers to select courses and designations that will advance them along their path to ownership.” The association offers more “non-traditional” education opportunities as well, says George Hodgson, IBAA CEO, “Taking advantage of networking opportunities offered by IBAA and PYIB can broaden your knowledge of industry trends and best practices while fostering connections that can come in handy down the road,” he says.
Choose Your Path
There are two main paths to owning a brokerage: purchasing an existing brokerage and starting your own from scratch, each offering its own benefits and challenges. An existing brokerage can offer more financial security—contracts with insurers are in place, staff is hired and trained, the customer base is built, etc. All this comes with a hefty price tag compared to starting from scratch. Many purchase deals are structured to pay out the seller and/or lender from profits over a period of time, so it can be quite a while until you are reaping the full financial benefits of ownership.
Many industry pundits predict a mass retirement of current brokerage owners in the next 5-10 years due to their aging demographic. That’s why it’s so important to make your aspirations known. “You never know what opportunities may be revealed,” says Losie. “You may find out that the owner is planning on retiring in five years—at least you can start having the conversation.”
Although brokerages are often sold to an owner’s next generation, don’t count yourself out if you’re not a family member. For example, PYIB president Dirk Bruggencate, now a partner in Blue Circle insurance, “… started in the mailroom and worked my way up the ranks.”
Starting a brokerage from scratch means you can implement your vision from the outset—the culture, processes, target markets, service standards, marketing strategy, etc.—and curate the staff and industry partners that will align with that vision. Easier said than done says Kevin Lea co-founder of startup brokerage, Fuse Insurance. “We’ve now seen a significant hardening in the marketplace, which has led to getting contracts being even more difficult now than it used to be … it’s probably the hardest step in starting a brokerage.”
Because of these and other challenges that startups face (e.g., cash flow), achieving success can be more challenging than buying an existing operation; however, the capital investment required is much lower. For Lea, the desire to build something unique (a fully automated online commercial platform) with his best friend, a software engineer, meant starting a brand new brokerage was the clear choice. “As the old saying goes, you can’t eat equity,” says Lea, “but I do think that that sacrifice now and the extra hard work to build this will pay off significantly in the end.”
Lea’s statement leads into the first of a series of questions I posed to a panel of IBAA members (most of them “young” brokers) who shared their insights and experiences in becoming a brokerage owner: Dirk Bruggencate, BlueCircle Insurance, Calgary Barry Haggis, Haggis & Young Insurance, Taber Kevin Lea, Fuse Insurance, Calgary Vicki Livingstone, Freeman Insurance, Innisfail Caleb Maksymchuk, Ravenhill Agencies, Edmonton (Some responses were edited due to space considerations.)
Define Your Why
Bruggencate: I really wanted to challenge myself and learn all aspects of the business and the industry. Being an owner still challenges me every day in our ever-changing industry. There are still many things to learn and a lot more wins to be had.
Haggis: Being in a family business, I am a third-generation broker, so it was always the plan for me to obtain ownership when the time was right. There is a strong sense of pride when I think back to my grandfather starting the brokerage in the 60s, then my parents and uncle taking over and now my brother and I taking the reins.
Lea: One is the ability to enact decisions and have those play out to see if your strategies are successful. There is no doubt a financial aspect to it as well. There is certainly the potential that if you work hard and build things out the right way, there can be significant financial reward.
Livingstone: I guess you could say that I always expected (and was expected to) take over my parents brokerage so there were never any thoughts of “Do I want to own a brokerage someday?” I knew I most likely would.
Maksymchuk: The initial lure for me was to continue a legacy that was started by my wife’s grandfather Ray Callies. Ravenhill saw its first large growth spurt spearheaded by Ray’s son-in-law Jim Harris. I am now the third-generation partner and also sonin-law to Jim. I started in the industry a bit later in my career having finished two university degrees, teaching in England and having a career as a Phys Ed teacher. At the time, the industry was starting to erupt with change. I wanted to be part of the change and help create success for Ravenhill just as Jim has done.
The Right Stuff
Bruggencate: Self-motivation— you can’t just sit at your desk and wait for things to happen and sometimes as an owner there is no one else there to light that fire under your butt. Valuable assets like education, processes and clients don’t just drop out of the sky; you need to go become the expert and get them.
Haggis: I was raised with a teamfirst attitude and had the opportunity to play team sports at a high level my whole life. I think that really helped with my leadership skills and that has transferred over nicely to owning a brokerage.
Lea: I think one of the skills that benefits me in this whole scenario is knowing insurance, as a product, ice cold … I think that’s really important to do—not just from a comfort level (in terms of) selling products to the client, but also from a perspective of showing your insurer partners and clients that you actually know what you’re doing. I also think that one of the key skills in running a business is the ability to do quality research … You can’t possibly know everything before you start, so knowing how and where to find those answers is really important.
Livingstone: Determination. When I set my mind to something I rarely give up. Fairness and honesty. I try my best to treat my staff like family … being fair and honest with them all.
Maksymchuk: Coaching is the new word for leadership. I found that having been part of team sports, and later coaching team sports, assisted with developing our own work team. Teaching and coaching went hand in hand, thus teaching skills and the ability to stand up in front of a “crowd” assisted when addressing a team or a room full of business/ industry leaders.
Take a Hard Look in the Mirror
Bruggencate: Looking at the big picture. Your business is a machine, and you need to understand and work with all parts of it. From finances and the products you sell to the staff you employ, you now need to consider all of these when making decisions.
Haggis: The one thing that I am still working on is delegating tasks. I have always struggled with that. I know how talented our team is here, and it should be an easy transition to delegate certain tasks to others and know they will get accomplished, but that is easier said than done.
Lea: Time management. … One of the other skills that I was a little surprised that I had to work on is making sure to balance my time between strategy and high-level thinking for running the company and the day-to-day minutiae.
Livingstone: I had never had a management position and was never taught any management skills in my previous positions such as writing policy and procedure, hiring and firing, accounting, etc. Education is the best way to resolve these issues. I have taken several courses along the way. I also have had to learn a little more patience and flexibility.
Maksymchuk: Other than everything? When you steer the ship you need to make long-term and short-term decisions (goals) to make sure you stay the course. Often things come up unexpectedly and you have to make quick decisions and stand behind them. Right or wrong. One thing that was hidden in the mentorship I received was how to conduct yourself in a boardroom. This is a skill that I am still developing every time I walk into one.
The Fear Factor
Bruggencate: Basically, the unknown and not knowing how to handle certain situations. I do best by learning as I go and observing. I am very lucky to be surrounded by a lot of exceptional people who have helped me out along the way.
Haggis: The money that can be involved is a worry, as you are putting up a lot of capital to purchase or buy into a brokerage. There will be years that go by when every penny you make will go towards the loan or whatever that may be. You need to be confident that you will be successful and be able to get any loans paid off before you will start making any real money and reaping the benefits.
Lea: Certainly, the first one that comes to mind is the financial stability. It may sound a little obvious, but it’s definitely a major concern of how do you go about actually supporting yourself.
Maksymchuk: Ownership of any business comes with larger responsibilities, different issues that arise and industry challenges that were not part of my original role. The single most important thing to do is to find a mentor … Having not gone to business school and starting later in life in the industry, my challenge rested in making sure I had enough education and knowledge to properly assess issues that arose and handle the new set of challenges that confronted me. Earning my CAIB designation was a great foundation for this.
Bumps in the Road
Bruggencate: Allowing work to take over my personal life. Being a brokerage owner takes a large devotion of your time and energy and can be quite stressful. You really need to teach yourself different ways of separating your professional life from your personal life. Things like exercise, vacations (without your cell phone glued to your hip) and meditation have helped me along the way.
Haggis: I was told about the workload prior to becoming an owner and that it is a lot different than servicing a book of business or writing new business. I didn’t quite grasp the full understanding until after I had gotten comfortable in the new role as owner. You deal with company contracts and company relations, you still deal with clients, you have a hand in dealing with your staff and any issues they may have with a client or company. The industry is changing all the time and you need to stay on top of that and be ready to make changes in your procedures, or marketing if need be.
Lea: The process of getting our first insurer contracts was definitely harder than I thought it would be. We were able to get it done, but it did take us longer than we expected … (by) being persistent and understanding the perspective of the insurance companies and what they look for.
Livingstone: When I left the brokerage in the 90s they had been gearing up for the future of paperless (no files) offices. When I came back in 2009, nothing had changed. They still had all their files and even some hand-written applications. Changing all the procedures, including our operating system, was a huge challenge. I had to get full “buyin” from all of the staff. Once they saw all the advantages of having everything on the computer and no longer hunting for files, it went pretty smoothly.
Great Expectations
Bruggencate: The extra-curricular stuff isn’t all fun and games. Don’t get me wrong, I really enjoy going to conventions, business trips and industry events, but it is a lot of work being “on” all the time, and it can be quite exhausting. Also, when it is all over with, you still have work at the office to do.
Haggis: I had always thought that owning a brokerage meant you could pop in once in a while to make sure things are going smoothly, you’d be going for lunch with companies or other brokerage owners, solving all the insurance problems of the world. But I have found myself working longer than I ever was before and it doesn’t really turn off. Don’t get me wrong, I enjoy it …
Lea: “When I’m the owner, I’m going to spend as much time working remotely as I possibly want to.” Wrong. I’m a big traveler. I’ve been to over 70 different countries. I love travel, airplanes, aviation, like the whole process of it. I have never been on less trips in my entire life. My far-flung adventures to Asia, Latin America and Europe turned into going to Edmonton and Toronto and Saskatoon … we’ve traded in the all-inclusives for the Holiday Inn Express.
Livingstone: I have always said that if you have a high turnover in staff you should look to your management. This isn’t always the case though. Sometimes the people leaving the organization don’t have a choice due to relocation, etc. I was also guilty of thinking that if I were the owner I could come and go as I pleased. Unfortunately, in many cases, the owner is the one who ends up staying late and coming in early to make sure that everything is running smoothly.
Maksymchuk: Things need to get done inside the office and outside the office. It is all part of the larger picture. It’s not easy, and you never know everything. There are many things that before ownership were not your problem; things you were never aware of. Once you are at the ownership table, they are very present every day.
Just Rewards
Bruggencate: For me it is the relationships I have developed with the awesome people I work with and have met through the industry. Ownership can give you the opportunity to experience things like conventions, broker boards or councils and the ability to work closely with all staff in the company. We really are lucky to have such great people in this industry.
Haggis: … when you sit back and think of how many lives you have an effect on by owning a brokerage. You have a direct hand in the experience that your clients have with your team and you offer a safe and productive work environment to your employees who know they are coming into a steady business where they can be successful and feel empowered.
Lea: Winning the award and the development of our team and their personal knowledge and growth have been the two most rewarding pieces to date. (Only four years old, Fuse recently received the Insurance Business Canada award for “Brokerage of the Year—under 10 employees.”)
Livingstone: I am very proud to own a brokerage where I can keep 14 other people employed and provide them with a steady income even when the economy is not the best. I am also very proud to be a strong member of our community and very well respected as such.
Maksymchuk: Being part of a legacy that was started long before me by someone with exceptional business knowledge and a business grown by someone with far better business and sales skills. Just being at this table is an honour in itself but being allowed to learn, coach, fail and find success without judgement and given confidence by person who wears so many hats, to me, makes being part of a family business very rewarding.
Annette Hubick operates Link PR Incorporated—a marketing and communications consulting firm—and has been the publisher/editor of The Alberta Broker since 1996.
